Which Federal Money Can Buy Maintenance Software at a Water Utility, and Which Cannot
State Revolving Fund money can pay for water infrastructure software, and the rules are not the same for drinking water and clean water. What EPA's guidance actually says, where the two funds diverge, what is expressly ineligible, and what still comes down to your state.
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The technology conversation at a water utility usually dies in the same place. Somebody establishes that a tool would help, everybody agrees, and then the question arrives that nobody in the room can answer: which pot does this come out of.
It is a fair question and it is rarely a rhetorical one. The American Water Works Association’s 2026 State of the Water Industry survey, drawn from 2,171 respondents, puts infrastructure renewal and replacement as the sector’s top challenge and financing second. The machinery that funds this sector was built for concrete, pipe and pumps, and a piece of software does not obviously look like any of those.
The answer is more favourable than most utilities assume, more specific than most vendors admit, and different depending on whether you treat drinking water or wastewater. This article sets out the federal floor. It cannot tell you whether your project is eligible, and any article that claims to is wrong, because the determination belongs to your state.
What EPA actually says
The Environmental Protection Agency addresses software directly in its Infrastructure Investment and Jobs Act (IIJA) State Revolving Fund (SRF) Questions and Answers, a running compilation whose current version is dated October 2025. Two entries govern, and they are not symmetrical.
On the Clean Water State Revolving Fund, the fund that serves wastewater:
“States may use CWSRF funds for the purchase and necessary upgrades of software for such uses as system controls, hydraulic analysis, geographic information systems, and customer billing projects. Projects, including these water infrastructure software purchases and upgrades, can help improve resilience through water loss management, pipe break prediction, optimal pipe and pump sizing, and pumping station energy reduction. Projects are not required to include construction to be eligible for CWSRF funds as long as they meet other SRF requirements.”
On the Drinking Water State Revolving Fund:
“States may use DWSRF infrastructure funds for the initial purchase of database infrastructure and software for such uses as system controls, hydraulic analysis, geographic information systems, asset management systems, and customer billing projects… These expenses can be stand-alone ‘projects’ or part of a larger eligible capital improvement project. Under the DWSRF set-asides, states may use the funds to purchase software or train water system operators and personnel in the use of such software. Annual support contracts or other ongoing software maintenance are not eligible.”
Emphasis added in both. Read them side by side and three things fall out that decide most of these conversations.
The three findings that matter
Software does not need construction attached to it. This is the single most useful sentence for a utility that has been told its request is not a capital project. EPA states plainly that CWSRF projects are not required to include construction. A standalone software project can be eligible on its own terms. On the drinking water side, EPA is equally explicit that these expenses “can be stand-alone ‘projects’ or part of a larger eligible capital improvement project”.
The two funds do not name the same things, and the asymmetry runs the wrong way for wastewater. The drinking water entry names asset management systems in its list of eligible software uses. The clean water entry does not. Both name system controls, hydraulic analysis, geographic information systems and customer billing. Asset management appears in one list and not the other.
That asymmetry deserves care rather than a conclusion. The lists are illustrative rather than exhaustive, both entries are phrased as examples, and the absence of a term from one list is not a federal prohibition. But it does mean a wastewater utility cannot point at a sentence with the words in it, and a drinking water utility can. If your system is a combined utility, that is worth knowing before you decide which side of the house the request goes through.
Recurring support is expressly excluded on the drinking water side. “Annual support contracts or other ongoing software maintenance are not eligible.” This is the sentence that reshapes how a purchase should be structured. An arrangement that is entirely a recurring subscription runs directly into it. An initial purchase, database infrastructure, configuration and integration work, and operator training in the use of the software are all treated differently from the annual support that follows.
Where a software request lands, and where the federal answer stops
Scroll sideways to see the whole drawing.
Figure 1. Where a software request lands, and where the federal answer stops. A decision tree beginning from the question of whether State Revolving Fund money can pay for a maintenance software project. Three paths are shown. On the first, a drinking water system making an initial purchase, EPA guidance names asset management systems explicitly, the expense may be stand-alone or part of a capital project, set-aside funds may also cover operator training in the software, and the remaining question is the state Intended Use Plan. On the second, a clean water or wastewater system making an initial purchase, EPA names software for system controls, hydraulic analysis, geographic information systems and customer billing but does not name asset management systems, construction is not required, the project must still meet a Clean Water Act section 603 eligibility, and the state decides. On the third path, recurring annual support or ongoing software maintenance on either fund, EPA states that annual support contracts and other ongoing software maintenance are not eligible under the drinking water fund, so the recurring component has to be funded from rates or another source and the purchase should be structured to separate initial and recurring costs. Every path ends at the same terminal condition, a state determination.
What is still a state decision, and why that is the whole answer
The State Revolving Funds are federal money administered by states. EPA sets the outer boundary. Each state runs its own program, publishes its own Intended Use Plan, sets its own priority ranking, and decides which projects are funded in which year.
For the Clean Water State Revolving Fund, every project must fit an eligibility under section 603(c) of the Clean Water Act. EPA publishes project eligibility factsheets, including one for planning and assessment, and the current set was last updated in June 2026. Which category a software project belongs to is a determination the state program makes, and EPA’s software guidance does not assign software projects to a category on their behalf.
So the honest form of the answer, for any specific utility, is this. Federal guidance permits certain water infrastructure software purchases. Your state decides whether your project qualifies, under which eligibility, in which funding cycle, and at what cost classification. Anyone who tells you their product is SRF eligible in the abstract is describing a category, not your project.
What to bring to the state, and when
Utilities that get this funded tend to do the same five things.
Ask early, in the plan year. State programs run annual cycles built around an Intended Use Plan. A request that arrives after the plan is set waits a year regardless of merit.
Bring the eligibility category, not just the product. Arrive with a proposed section 603(c) category and the reasoning, rather than asking the state to construct the argument. The state is deciding a classification question, so give them the classification.
Separate the costs in writing. Initial purchase, database infrastructure, configuration and integration, training, and recurring annual support belong on separate lines. The federal guidance treats them differently, so a single blended annual figure invites a single unfavourable answer.
Connect it to physical outcomes. Both EPA entries frame software in terms of what it does to the system: water loss, pipe break prediction, pump sizing, pumping station energy. A request framed as an operations improvement, tied to named assets and a named failure mode, sits inside that framing. A request framed as productivity does not.
Ask what evidence the program wants. State programs vary widely in documentation. The cheapest time to learn what they need is before the application, not during it.
The second question your finance office will ask: how is it carried on the books
Eligibility decides whether the money can be spent. It does not decide how the purchase is recorded, and for a subscription the second question arrives immediately after the first.
Governmental Accounting Standards Board Statement No. 96, Subscription-Based Information Technology Arrangements, was issued in May 2020 and has been effective for fiscal years beginning after 15 June 2022. It applies to a contract that conveys control of the right to use another party’s IT software for a period of time in an exchange or exchange-like transaction. A maintenance software subscription is squarely inside that definition.
The practical consequences are three, and a finance director will already know them.
A subscription is not simply an operating expense. Under GASB 96 the government recognises a right-to-use subscription asset and a corresponding subscription liability, with the liability initially measured at the present value of the subscription payments expected during the subscription term. That puts a multi-year software subscription on the statement of net position rather than only in the operating budget.
The twelve-month test is the exemption that matters. GASB 96 provides an exception for a short-term SBITA, defined by a maximum possible term of twelve months at commencement, including any options to extend. A twelve-month pilot with no extension option is treated differently from a three-year subscription, and the difference is not cosmetic. If the pilot is structured to be genuinely short term, the recognition requirement does not apply to it.
The cost categories you separated for the state are the same ones the accountant needs. Initial implementation, configuration and data conversion, training, and recurring subscription payments are treated differently under GASB 96 in the same way the federal guidance treats them differently for eligibility. Separating them once serves both conversations.
None of this makes a purchase harder. It makes it predictable, and it means the finance office is not surprised in the audit after the operations team has already committed. The useful move is to send the draft subscription terms to the finance office and the auditor before signing, and to ask explicitly whether the arrangement is being treated as short term.
A note on WIFIA, because it is usually the wrong instrument here
The Water Infrastructure Finance and Innovation Act programme is a federal credit programme, not a grant, and it finances capital projects. EPA’s programme materials set a minimum project size of 5 million dollars for communities of 25,000 people or fewer and 20 million dollars for larger communities, and cover up to 49 per cent of eligible project costs.
A standalone maintenance software purchase does not reach those thresholds. Software can appear inside a larger WIFIA-financed capital project where it is genuinely part of that project’s scope, and utilities do bundle instrumentation, controls and data systems into treatment or conveyance work. As a route to buying software on its own, it is not the instrument. We say so because the alternative is a utility spending a quarter discovering it.
Where AIMMS fits
EQUA AIMMS is bought and deployed on the same terms as any other water infrastructure software, and the classification questions above apply to it exactly as they apply to anything else. We can tell you what the deployment consists of, which costs are one time and which are recurring, and what it does to named assets and named failure modes, because those are the inputs a state program actually evaluates. We cannot tell you that it is eligible, and we do not.
What AIMMS does operationally is coordinate the digital work around a repair: assembling the evidence with each item traced to its source, verifying parts against the installed configuration, preparing the sourcing route, and routing approvals to the authorised owner with the evidence attached. Operational context is read only, AIMMS holds no write path to control systems, and qualified people perform the work and authorise return to service.
The 20-minute assessment produces the artifact this article is really about: one named workflow, the delay in it, and what a first scope would consist of, in the form a finance director and a state program can both read.
The question worth asking this week
Call your state revolving fund program office and ask one question: what would you need to see to consider a standalone water infrastructure software project in the next Intended Use Plan.
That call costs nothing, it is the only source of a real answer, and most utilities have never made it.
Sources
- United States Environmental Protection Agency, Infrastructure Investment and Jobs Act (IIJA) State Revolving Fund (SRF) Questions and Answers, version 6, October 2025. Question 6.26, “Are software projects related to water infrastructure CWSRF-eligible?”, and question 6.27, “Are database infrastructure and software purchases related to water infrastructure DWSRF-eligible?”, both added 8 November 2023 and current in the October 2025 compilation. Both passages are quoted in full above. Scope: these are federal guidance answers describing what states may do; they are not determinations about any specific project.
- United States Environmental Protection Agency, CWSRF eligibilities and project category factsheets, page last updated June 2026, on the requirement that projects meet an eligibility under section 603(c) of the Clean Water Act.
- United States Environmental Protection Agency, DWSRF Data Management Fact Sheet and Case Studies, referenced directly by question 6.27.
- Governmental Accounting Standards Board, Statement No. 96, Subscription-Based Information Technology Arrangements, issued May 2020, effective for fiscal years beginning after 15 June 2022. Cited for the SBITA definition, the right-to-use asset and subscription liability, and the short-term exception at a maximum possible term of twelve months including extension options. Scope: this is a financial reporting standard, not a procurement rule, and it does not speak to eligibility.
- United States Environmental Protection Agency, Water Infrastructure Finance and Innovation Act (WIFIA) programme, and the WIFIA Program Handbook. Cited for the 49 per cent cost share and the minimum project sizes of 5 million dollars for communities of 25,000 or fewer and 20 million dollars otherwise.
- American Water Works Association, 2026 State of the Water Industry report, released May 2026, based on 2,171 respondents. Cited for the ranking of infrastructure renewal and replacement first and financing second among sector challenges.